Customs, Excise and Gold Tribunal - Mumbai
Collector Of Central Excise vs Century Spinning And Manufacturing Co. ... on 25 October, 1985
Equivalent citations: 1986(25)ELT829(TRI-MUMBAI)
ORDER K.S. Dilipsinhji, Member (T)
1. The Deputy Collector of Central Excise, Bombay I has filed the present appeal against the Order No. M-1488/BI-477/84 dated 17-7-1984 of the Collector of Central Excise (Appeals) Bombay under which the Collector (Appeals) has held that no interest was payable under Rule 49A on yarn which was used for manufacture of fabrics which were subsequently re-exported without payment of Central Excise duty under Rule 13 of the Central Excise Rules, 1944. The Collector of Central Excise, Bombay I has given the necessary authorisation to the Deputy Collector to file the present appeal. Before the learned Senior Departmental Representative started the submissions on behalf of the 'appellant Collector, I asked him as to whether this matter was within the purview of the Appellate Tribunal or whether the jurisdiction of the Appellate Tribunal was barred under Section 356(1) proviso of the Central Excises & Salt Act, 1944 and as a consequence of which the application lay to the Central Government under Section 35EE ibid. Shri Senthivel submitted that the present appeal did not cover any aspects whereof the jurisdiction of the Tribunal had been barred under the aforesaid provisions of law. The question covered by the present appeal was whether in the case of fabrics and yarn exported without payment of duty under Rule 13, the- interest was payable as held by the Asstt. Collector in terms of Rule 49A which defers the liability to payment of duty. Therefore, Shri Senthivel submitted that the matter was within the purview of the Appellate Tribunal. The Respondent's representative Dr. Jois also referred to the proviso to Section 35B(1) and stated that the appeal did not. fall within the aforesaid proviso as it did not relate to a claim for rebate of duty on goods exported outside India. The question for consideration was whether the goods could be exported without payment of interest leviable under Rule 49A. Since both the appellants and the respondents agreed that the Appellate Tribunal had the jurisdiction in the present appeal, I decided to reserve my decision on the question of jurisdiction of the Appellate Tribunal to hear and decide this appeal on merits, and proceeded to hear the arguments on merits pending my decision on the aspect of jurisdiction subsequently. Shri Senthivel made a prayer that in case I held that the Appellate Tribunal did not have jurisdiction to decide the present appeal, the same may be transferred to the Government, of India who would have the jurisdiction. 1 agreed to Shri SenthivePs request on the condition that if I decided that the jurisdiction for hearing the present appeal lay with the Government, the same would be transferred to the Central Government.
2. Shri Senthivel submitted that M/s. Century Spg. & Mfg. Co. Ltd opted to pay duty on cotton yarn under Rule 49A of the Central Excise Rules. As per this Rule, an' interest of 1 -1/2- % or 3% was payable on the amount of duty of yarn involved in case the fabrics were cleared unprocessed or after processing. Coming to the facts of the case, Shri Senthivel stated that the respondents manufactured fabrics and exported them without payment of duty under Rule 13. Since the export was made under Rule 13, no duty was leviable on cotton fabrics and cotton yarn used in the manufacture of cotton fabrics as per Explanation to 2(ii) to Rule 13. The Respondents had executed the bond as required under Rule 13 and followed the prescribed procedure in terms of Rule 13. While debiting the amount of duty to the B-1 bond, the Department had also debited the amount of interest to the bond account. Later on, the Range Officer issued two demand notices to the Respondents for the amounts of interest involved of Rs. 21,477.25 for the period 1.8.1981 to 31-12-1982 and for Rs. 24,641.70 for the period from 1.1.1981 to 31.7.1981. Shri Senthivel submitted that according to the appellant, the respondents could export the goods without payment of duty under Rule 13, but they were not saved from the payment of interest leviable under Rule 49A as under Rule 13 the exports could be made without payment of duty but not without payment of interest. Shri Senthivel referred to the definition of "Duty" under Rule 2(v) of the Central Excise Rules and contended that this did not cover interest. Rules 12 and 13 concern duty only and not interest. Under Rule 49A interest was payable on clearance of yarn for home consumption. There was no authority under the aforesaid Rule for waiving the interest charges. The department was only demanding the interest, the payment of which had been defered under Rule 49A. In normal circumstances, the yarn would have been cleared on payment of duty before the same could be woven into fabrics. The postponement of the duty leviable could not therefore justify waiver of interest. Shri Senthivel argued that Rules 9 and 49 had been amended under Government of India Notification No. G.S.R. 74(e) dated 20-2-1982 and an explanation had been added to the aforesaid Rules. Under Section 51 of the Finance Act, this amendment had been given retrospective effect as from 20-8-1944. These Rules had been framed by the Central Government under Section 37 of the Act and therefore they had the force of law. Rule 49A was optional and the manufacturer could chose to opt for this procedure or could comply with the normal procedure of paying duty under Rule 9 and 49. For a manufacturer working under Rule 49A, it was not possible to envisage whether the yarn to be woven into fabrics would be ultimately exported or not. But this fact did not affect the liability to pay the interest under Rule 49A which deferred the collection of the duty on yarn. In the case of export of fabrics by a manufacturer working under Rule 49A, duty was not charged on the fabrics and the yarn under Rule 13 and the explanation thereunder. The non-payment of duty did not cover the amount of interest. Hence, the Collector (Appeals) order placing reliance on Rule 49A to the effect that duty and interest are one and should be taken together was not correct. Similarly, Collector (Appeals) had also argued that interest was part of duty and this argument was also not correct. Under Rule 49A, interest was specifically mentioned and it was chargeable only in case the manufacturer opted for Rule 49A procedure. The levy of the interest was postponed till the clearance of the fabrics for home consumption in terms of Rule 52. Since Rule 49A was a concession" to the 'manufacturer, it Was legitimate to charge interest on the amount of duty on yarn concerned. The order of the Collector (Appeals) was therefore without any authority of law and against the provisions of Rule 13 and Section 3 of the Act. The definition of "Duty" under Rule 2 would not cover interest and therefore the interest was payable in any event. Accordingly, Shri Senthivel prayed for restoration of the Assistant Collector's order dated 28-9-1983 and allowing the appeal filed by the Collector of Central Excise, Bombay I.
3. Dr. Jois stated that the Central Excise duty was leviable under Section 3 and it was to be collected in the prescribed manner. The prescribed manner was defined under Section 2(g) to mean as laid down by the Rules made under the Act. Rule 49A was therefore the prescribed procedure for collecting duty in the circumstances envisaged by it. This was the law and no charity was shown in deferring the payment of duty. Besides, Dr. Jois argued that the Government encouraged exports and did not want any burden to be cast on the exporters. The Government, therefore, did not intend that the burden of interest should be added in case of exporters of fabrics. He contended that the duty on cotton yarn was imposed with effect from 28-2-1961 till this was abolished temporarily by the budget of 1977 with effect from 18-6-1977. During this long period, the procedure had been laid down for removal of yarn without payment of duty for the manufacture of fabrics and the duty on yarn was being paid along with the duty on fabrics at the time of the removal of the fabrics from the mills. The deferment of the duty on yarn did not entail any payment of interest till 18-6-1977. This was the Government's policy till the same was changed by the incorporation of Rule 49A in the Central Excise Rules. Under this Rule, yarn duty was payable along with the duty on cloth. Dr Jois argued that the duty payable was distinguishable from duty leviable. He cited the example of levy of special duty of excise as a percentage of basic duty of excise and the interpretation and administration of the Central Excise officers in respect of special duty which was treated as Nil when the basic duty payable was nil. He also quoted Notification 53/ 85 dated 17-3-1985 in support of his contention. He thus argued that duty leviable is not the same as duty payable. Under Rule 49A, the interest payable was l 1/2% or 3% of the duty payable on yarn. If therefore the duty payable on yarn was Nil, a percentage of nil amount would also be nil. Dr. Jois submitted that in view of the foregoing facts, the SDR's contention that interest was chargeable was not correct. He submitted that Collector (Appeals) order was accordingly correct and was supported by the reading and interpretation of Rules 49A and 13. Rule 49A was issued under Section 38 and has the force of law. The Collector (Appeals) order was quite correct and therefore, the appeal filed on behalf of the Collector of Central Excise, Bombay I should be dismissed.
4. Shri Senthivel argued in reply that it was not denied that duty on yarn was payable in the normal circumstances when it was removed for manufacture of fabrics from the Spinning Department. The yarn itself was not exported and hence interest was correctly payable by the respondents as they had willingly opted for the procedure of payment of duty on yarn under Rule 49A, which also included payment of interest charges. As regards the Respondent's argument that the Government encouraged exports, this encouragement had to be within the framework of the Rules. The Rules did not envisage non-payment of :nterest and hence interest was correctly chargeable under Rule 49A. Therefore, the order of the Collector (Appeals) dated 17-7-1984 was illegal and it should be set aside and the order dated 28-9-1983 of the Asstt. Collector should be restored.
5. The first question to decide is the jurisdiction of the Appellate Tribunal to hear this appeal. Three categories of cases have been excluded from the jurisdiction of the Tribunal under the proviso to Section 35B(1) of the Central Excises & Salt Act, 1944 and these matters are assigned to the Government under Section 35EE ibid. The Respondents representative argued that this was not a case relating to rebate of duty of Excise on goods exported. But when I drew his attention to Clause (c) of the proviso, Dr. Jois resorted to over-simplification in stating the proposition that the appeal related to export of goods without payment of interest and not without payment of duty and therefore, the appeal was within the jurisdiction of the Appellate Tribunal. Inter alia, the jurisdiction of the Appellate Tribunal is barred if the appeal relates to goods exported outside India. Therefore, the question for consideration is whether the goods for the above purposes would cover yarn also. In the course of his submissions, the learned SDR has drawn my attention to the Explanation 2(ii) to Rule 13 which defines goods for the purpose of Rule 13 etc. Therefore, the question arises whether this definition should hold good for the purpose of interpreting Section 35B(1) proviso. While we have authorities which state that the definition of words and phrases under the Parent Act would hold good for defining the same for the purposes of Rules and Notifications issued thereunder, no such authority exists to my knowledge which would show that the words, phrases etc. defined in Rules should be taken for the purposes of interpreting the Act. The Explanation 2 to Rule 13 appears to have been introduced only with a specific purpose of permitting the export of the excisable goods used in the manufacture of goods which are exported without payment of duty on the excisable goods so used. This explanation therefore, gives legal authority for not charging duty in cases of the type under consideration where yarn is removed without payment of duty for the manufacture of cloth which is subsequently exported without payment of duty under Rule 13. Therefore, this explanation used for the special purpose of Rule 13 cannot apply for interpreting Section 35B(1). While Section 2(d) defines "Excisable Goods", no definition is available for "Goods". However, it is pertinent to consider that after the inclusion of items 68 in the Tariff with effect from 1-3-1975, there are hardly any goods which are not excisable. Therefore, after this date, the dividing line between "goods" and "Excisable goods" has become very thin if not totally absent. This would bring me to the definition of "goods" as it is known for the purposes of the Excise Act. The Supreme Court in their decisions in the South Bihar Sugar Mills Ltd. v. The Union of India 1978 ELT 336 (SC) and The Union of India v. Delhi Cloth and General Mills Ltd. 1977 ELT 199 (SC) held that for the purpose of the Act, the goods should ordinarily come to the market to be bought and sold. However "Goods" has been defined under Article 366(12) of the Constitution and this includes all materials, commodities and articles. The Constitutional definition follows the definition of "Goods" in the Sale of Goods Act, 1930. This definition covers by arid large moveable property and excludes things attached to or forming part of the land. Therefore, considering the definition of goods for the purpose of Section 35B(1) proviso, it is seen that goods are in the present case fabrics only and not yarn which has been consumed in the manufacture of fabrics. In this view, the narrow definition of goods under the explanation to Rule 13 cannot serve as a guide for interpreting Section 35B(1). Since the appeal does not relate to fabrics which were exported without payment of duty under Rule 13 but to the interest chargeable on the yarn removed for being woven into fabrics under Rule 49A, I am of the opinion that the jurisdiction of the Tribunal is not barred under the aforesaid provisions of law and that this Tribunal has the authority to decide this appeal, as the goods in the present case are fabrics and not yarn for the purpose of Section 35B(1).
6. As regards the merits of the appeal, the learned SDR Shri Senthivel has urged that but for Rule 49A,the interest of 1-1/2% or 3% on the amount of duty of yarn would have been charged even though the fabrics were exported without payment of duty under Rule 13. Shri Senthivel has stated that this is a concession to the manufacturer but the concession cannot be extended to non-recovery of the interest. He has also further urged that the fabrics' could be exported without payment of duty under Rule 13 or on rebate of the Central Excise duty already paid under Rule 12. But in either case, the interest under Rule 49A would be charged and retained by the Central Excise officer as none of these Rules authorised the repayment or non-recovery of the interest amount. Shri Senthivel has also relied on the definition of "Duty" under Rule 2(v) of the Central Excise Rules to urge that Rules 12 and 13 would not cover interest. Examining the aforesaid contentions, it is seen that under Rule 49A, interest is chargeable at the appropriate on the amount of duty on yarn. The method prescribed for paying the duty on yarn and the interest is to' pay these along with the duty on the fabrics in the manner prescribed under Rule 52. Rule 52 envisages clearance of the goods on payment of duty for home consumption. When the goods are removed either from the place or premises specified under Rule 9 or from a store room or other place of storage approved under Rule 47, an application has to be made for the aforesaid purpose of clearance of goods on payment of duty. Therefore, in terms of Rule 49A, the duty on the yarn is postponed till the fabrics are removed from the factory under Rule 52. But in case where the goods are not cleared on payment of duty for home consumption, but for export under Rule 13, the recovery of duty on yarn is waived under Rule 13 along with the duty on fabrics. The explanation discussed above authorises the waiver of the duty on the yarn. But this still leaves us with the question as to whether the interest is waived or not. Shri Senthivel has contended that interest is not duty and therefore there is no waiver of the same. On the otherhand, Dr. Jois has argued the interest is a percentage of the duty on yarn leviable under Rule 49 and when the duty is 0, any percentage of 0 would be also 0. This is correct in mathematical terms. Apart from that Dr. Jois has also given illustrations in support of his contention. One is the Notification No. 53/85 dated 17-3-1985. Scrutinising Dr. Jois contention, it is seen that this Notification is issued in exercise of power under Rule 8(1) reai with Section.3(3) of the Additional Duties of Excise (Goods of Special Importance) Act, 1957 and therefore exemption is granted from duty leviable under both the Acts. This example is therefore not apt and does not support Dr. Jois argument. However, the other example relied on by Dr. Jois is the levy of special excise duty. This example is quite valid. The Special Excise Duty is levied under the provisions of the different Finance Acts in recent years. The Special Excise Duties are by way of a percentage of the basic excise duty leviable under the Central Excise Tariff. Where therefore the basic excise duty is Nil, the special excise duty is also Nil. This contention of Dr. Jois is quite weighty in interpreting the question under consideration in this appeal, namely whether interest charges can be levied when the basic duty is not payable. Dr. Jois has also drawn a fine distinction between duty leviable and duty payable. In other words, he has argued that though duty is leviable on the yarn under Rule 49A, the payment of the duty is stayed by export of the yarn in the form of fabrics under Rule 13. This is quite correct. Besides, the Department follows the same interpretation in levying additional duty of excise on textiles and textile articles under the Additional Duties of Excise (Textiles and Textile Articles) Act, 1978. The rate of additional duty leviable under this Act as amended by the Finance Act, 1981 is 15% of the total amount of excise duty chargeable on the goods. Where therefore the excise duty chargeable on the goods is Nil, no additional excise duty is leviable under this Act. This analogy will therefore hold goods in determining whether interest is chargeable under Rule 49A in the present appeal or not. In my view, since the duty on yarn is Nil, the interest is also Nil. In coming to this conclusion, it is not necessary to refer to the provisions of Rule 12 or 13 of the Central Excise Rules, 1944. The relevant Rule-is 49A and as construed in the above manner it does not authorise the department ; to charge interest where fabrics are exported without payment of duty i under Rule 13 by a composite mill who has opted for payment of duty on yarn under Rule 49A. In this view it is not necessary for me to go into the'contentions of the Learned SDR that the Department had debited the amount of interest to the bond account maintained by the Respondents with the department for the export of fabrics under Rule 13. In this way, the definition of 'duty' under Section 2(5) excluding the interest charges as urged by the SDR does not in any way militate against the interpretation of Rule 49A. In view of these facts, I find that the contentions advanced by the Collector of Central Excise, Bombay I in his appeal are not sustainable. Accordingly, I reject the appeal filed by him.